A Shifting Landscape: White Collar Crime Reforms on the Radar

Author: Nyman Gibson Miralis

Subject: White Collar Crime

Keywords: white collar crime Australia, white collar crime reforms, penalties.

 

For some time now, it has been observed that there are perceived legal and procedural deficiencies concerning the way in which white collar crime is dealt with in Australia – significant changes however have been proposed by the Senate Economics Reference Committee in 2017.

After years of numerous enquiries into the most appropriate ways to handle reform, the Senate has released a report that contains several recommendations which appear to seek to address the perceived inadequacy and inconsistency of penalties, among other regulatory changes.

 

What is the background to the report?

In March 2017, the Senate Economics References Committee released a report entitled Lifting the fear and suppressing the greed: Penalties for white collar crime and corporate and financial misconduct in Australia.

The report was compiled based on submissions from many stakeholders, including the federal government, law enforcement and corporate bodies.

It recommends that Australian penalties on white collar crime be increased and made consistent across the board, in line with the treatment of similar crimes by many other countries, including the US and the UK.

These proposed reforms aim to reduce or even eliminate the purported perception that it is “easy” or without real consequence to commit white collar crime in Australia.

 

What changes are likely to occur regarding white collar crime in Australia?

The key changes are likely to include:

  • Increasing the range and quantum of civil penalties provided for in the Corporations Act 2001 (Cth). Although there are potential criminal penalties for more extreme white collar crime, successful prosecution can be difficult to achieve and often results in alleged wrongdoers failing to meet the criminal burden of proof, and thereby avoiding any real penalty. Increasing the amount of civil penalties and the range of offences which these could apply to will have a broader deterrent and punitive effect than the current system.
  • Changing penalty structures so that there is a correlation between the amount misappropriated and the punishment imposed on wrongdoers, particularly having regard to the fact that at present maximum civil penalties for individuals under the Corporations Act are capped at $200,000 – which some have observed represents a only a small percentage of what most high-level executives and company directors receive in salary. The maximum penalty of $1 million for corporations (dating back to 2004) may be construed by many larger companies as the simple cost of doing business, and it has therefore been argued that it does not achieve the desired punitive or deterrent effect. Further, these maximum penalties are inconsistent with other federal legislation such as the ASIC Act, whose maximum penalties are $360,000 for individuals and $1.8 million for corporations. The Corporations Act penalty structures, many of which have been in place since the introduction of the legislation in its current format in 2001, need to be updated to reflect inflation and the severity of the crimes to which they relate. Specifically, it has been proposed that fines reflect a multiple of the financial benefit received by the wrongdoer.
  • Requiring those involved in non-criminal matters to disgorge profits made, or losses avoided, from their crimes. As set out in the report, the Australian Securities and Investments Commission (ASIC) anticipates that this will have a particular deterrent effect on corporations who may otherwise be prepared to risk a fine or penalty, even a significant one, in order for a large financial gain.
  • Introducing uniformity in procedures and rules for civil penalty proceedings across all Australian regulators. This represents a change from the current system, where different criteria may apply depending on whether ASIC, the Australian Prudential Regulation Agency, the Australian Taxation Office or the Australian Competition and Consumer Commission are prosecuting a claim.
  • Improving whistleblower protections, with an intended focus on making it easier to detect and prosecute white collar crimes. An ongoing enquiry into whistleblower protections is presently being undertaken by the Parliamentary Joint Committee on Corporations and Financial Services, the findings of which will steer the direction of this proposed change to the white collar crime system.
  • Introducing deferred prosecution agreements (DPAs) for certain serious corporate crimes. These DPAs would effectively take the form of a negotiated settlement between a prosecutor and an alleged corporate wrongdoer. The intention is for the defendant company to pay an applicable penalty, implement changes in the organisation to avoid any recidivism, and obviously cooperate with any investigation.
  • Improving and changing ASIC’s register which records persons banned and disqualified from having roles of responsibility in companies, specifically by improving search functionality and user ease of access.

 

Conclusion

While it’s not yet certain what action the government will take as a result of the report, the recommendations are intended to change the way in which white collar crimes are prosecuted. Similarly, reviews of penalties and the introduction of other punitive measures appear to be intended to remove inconsistencies in how different offences are treated by the courts.

 

Nyman Gibson Miralis specialise in all aspects of white collar crime and corporate crime law, including laws concerning money laundering, fraud, tax offences and bribery of foreign public officials. If you require assistance, contact one of our expert criminal defence lawyers